An audit conducted for clothing retailer Gap Inc. identified issues with working conditions, health and safety at two factories in Burma that are now producing garments for the United States-based company.
Measures have been taken to address the so-called “compliance issues” at the Gap-supplying factories, according to a comprehensive new report compiled by the clothing company addressing responsible investment issues in Burma, which lays bare some of the challenges that Western brands face entering Burma’s garment sector as it looks to return to its former productivity.

Gap announced in June that it had begun shipping “made in Myanmar” jackets and vests for its Old Navy and Banana Republic Factory labels to the United States, becoming the first major American retailer to source from the Burmese garment industry since economic sanctions were suspended in 2012.

The company submitted a report titled “Responsible Sourcing in Myanmar” to the US Embassy in Rangoon on Monday, which has been posted on the embassy’s website.

It outlines extensive due diligence conducted by Gap on the broader political and human rights situation in Burma, the company’s engagement with the International Labor Organization and others working for labor rights in Burma, and more detailed assessments of the two South Korean-owned factories in Rangoon that are producing garments for Gap.

These include building and fire safety checks that “identified areas for improvement but did not find any imminent threats to worker safety related to either factory’s structural integrity” and an audit conducted of the factories by labor rights nonprofit Verité.

“The initial, full assessment in November 2013, which was conducted prior to approving each factory for production, uncovered a number of compliance issues,” the report said of the Verité audit.

The assessment for Gap mirrors concerns previously highlighted by labor advocates about garment factories in Burma, where workers are paid minimal wages for working long hours in poor conditions.

It found that both factories did not have policies in place on disciplining workers, leading to “inconsistent disciplinary practices and punitive fines.”

“Workers reported cases of verbal abuse and inappropriate behavior by supervisors. Cases of witnessing or being subjected to verbal abuse were considerably more common at one factory than the other,” the report said.

“Line supervisors had taken unofficial disciplinary action or collected fines from workers without a clear basis for action at one factory.”

Gap said the factories had since the audit instituted disciplinary policies, conducted training of managers and reprimanded supervisors“who engaged in verbal abuse or inappropriate behavior toward workers.”

Verité also found that workers were regularly working overtime, for which they were not consistently paid at a premium rate.

“Working hours exceeded the permitted limit of 60 total hours (including overtime), and workers did not take one day off in seven days. On the other hand, workers interviewed at one factory did consider overtime work to be voluntary,” the report said, adding that, “Workers did not understand how to calculate their wages.”

In the factories, health and safety issues were also found, including workers not being instructed on wearing safety equipment and inadequate ventilation in workspaces.

The report said the audit found no evidence of child labor being used at the factories. However, both factories had used underage workers in the past, and at the time of the initial assessment comprehensive age verification processes did not appear to be in place, it said.

Gap said that since the audit, one of the factories had improved sufficiently to be compliant with its code of conduct for vendors, and the other had “made considerable progress in improving working conditions and factory safety, though a limited number of key issues remained.”

“While work remains to meet our expectations for sustained performance and continuous improvement, each factory has taken important steps that have considerably improved working conditions and compliance with our [code of vendor conduct] since Verite’s first full audit in
November 2013,” the Gap report said.

Although American companies investing more than US$500,000 in Burma are subject to reporting requirements, Gap said that since the firm is only sourcing from the country, it had compiled its report voluntarily.

The company is creating more than 700 new jobs in Burma and its garment orders will aid the employment of some 4,000 people, it said, without naming the two factories.